Third-party and drop shipping is a huge part of today’s e-commerce landscape. As a result, it is vital to understand this fee and know how it affects your daily shipping costs. The FedEx third party billing charge applies to express and ground services. Currently, the FedEx 3rd party billing fee is 4.5% of transportation charges, surcharges, and value-added service fees. Remember this does not include duties, taxes, and ancillary clearance service fees.

Third Party Billing Surcharge
A surcharge will apply to shipments that will bill to a third party. The surcharge applies when an account unrelated to the shipper, as determined by FedEx, is billed as a third party for the shipment. The charges apply to the third-party payer. See the Billing section in the FedEx Express Terms and Conditions and the FedEx Ground Tariff for the definition of a Bill Third Party shipment.

The sender is ultimately responsible for all charges and fees if the recipient or third party fails or refuses to pay for the shipments. Be aware that the complete package cost could be rebilled back to your account if you are the shipper. The FedEx money-back guarantee still applies to packages with the FedEx third party billing surcharge. Remember, if the package arrives even 60 seconds late, you have the option to have the shipping charges refunded.

What is “Bill Third Party”

There are basically three different ways to pay for shipping charges with FedEx:

• Bill Sender – charges apply to the sender’s account number. The sender’s FedEx account number must appear on the airbill and be in good credit.
• Bill Recipient – charges apply to the recipient. (This is not C.O.D. service.) The recipient’s FedEx account number must be on the airbill at the time of shipment. Or by the recipient at the time of delivery, and must be in good credit standing. But, if the account number is not present, the recipient must pay for the shipment upon delivery.
• Bill Third Party – charges apply to someone other than the sender or recipient. Charges for U.S. shipments may apply only to a third party in the U.S. This is our focus today.

When the bill sender or third party option is selected to pay duty-and-tax charges, the payer is invoiced for all applicable ancillary service fees. This includes fees assessed for clearance in the destination country, including all fees resulting from ancillary services requested by the recipient.

How can to reduce FedEx third party billing surcharges?

Our first reaction to this fee is to negotiate with your carrier representative to have this fee removed or discounted. A full FedEx agreement renegotiation should include concessions for all the fees impacting your shipping spend. Before you head down this path, know your data. Ask yourself the following questions:

• How much does the FedEx third-party billing surcharge cost my company per year?
• What percentage of my packages are affected by the UPS third party billing fee?
• What percentage of my company’s total shipping spend is due to this fee?

If you are seeing this fee have a true impact on your transportation costs, then try for a contract negotiation concession. Otherwise, ask for a large discount on FedEx ground third party package rates to compensate for the additional charge. For instance, the contract could stipulate a 30% discount on UPS ground residential charges and a 35% discount on FedEx ground residential third party charges.

Another answer we have seen would be to change your FedEx billing address to the location of your drop shipper. If you use FedEx online billing, the paper invoices will never be sent via US mail. But you are able to view the invoice online. We do not have any confirmation of the validity of this workaround. Therefore, if you have done this, drop us a line and provide some feedback!

Final considerations

If you are shipping on another person’s FedEx account as per their request, be aware of possible chargebacks. Monitor your FedEx invoice regularly for chargebacks and FedEx 3rd party billing fees. For more information, click the link below.